Customer Data — Are You Giving It Away?

What if the company that is adding to your bottom line is actually slowly taking business away from you? If you run a business that’s been carefully collecting customer data to help deliver more personalized shopping experiences, make people happy with your high level of service and win their loyalty, watch out. If you’re not careful, your customer data could slip right through your fingers — and into the hands of other businesses that deliver your products and services to consumers.

Instacart, Favor, Amazon Prime Now: They all connect directly with customers, and that means they all have the opportunity to step in and collect the data those customers used to share with you instead. What does that mean for your business? For theirs? For your customers? This latest shift in data control has implications for all the parties in the picture. It’s in your interest to be aware of these implications to your Data Rights as you make strategic business decisions about everything from how you collect and use data in your company to how you do business with other companies.

Keep in mind that it’s not just retail businesses that are affected by this shift in who connects with consumers in the marketplace. For example, many people today — particularly millennials, according to one report — don’t get their news directly from news providers; instead, they view or read it onTwitter, Facebook or other channels. And what about companies whose employees are buying business applications in the cloud instead of getting them from their company IT department? That creates an added layer of risk that the data collected from them in the process isn’t just private consumer data, but possibly sensitive corporate data, too.

Whose data is it anyway?

That’s not a simple question. For example, people have been debating for years about who consumer data belongs to: the consumers it comes from or the companies that collect it. But let’s say for the purposes of the topic at hand that the data you collect about your customers — with their full permission and agreement — belongs to you, at least in the sense of your ability to use it to market to them and deliver more personalized, satisfying customer experiences to them. And because it’s your data, you can control how it’s used and guard against access to it by others.

But whose data is it when your customer is also someone else’s customer — especially when that someone else is the company that’s connecting directly with customers? If you sell products through Amazon Marketplace, for example, and customers pay for them through Amazon.com, they’re Amazon’s customers. And Amazon can collect, keep and use their data to sell to them. As someone recently pointed out in an article in The Guardian, Amazon has customer email addresses and browsing histories that its Marketplace sellers don’t have access to, limiting the sellers’ ability to nurture close relationships with the customers and creating a competitive advantage for Amazon.

Business relationship status: It’s complicated.

The picture isn’t always as black-and-white as what I’ve described above, where a company establishes a direct relationship with your customer and then can use it to establish competitive advantage. In a different twist, the grocery delivery service Instacart has started asking its customers to share data— not just with Instacart, but with the retailers who are Instacart’s clients.

If you’re a grocer, you could look at that as a glass-half-full scenario in which you have a new stream of customer data coming in from Instacart. That’s good, right? Sure, to the extent that it’s data from those who perhaps aren’t your customers already. You can use it to build your own direct relationships with them, right? But if they are your customers already, then aren’t you relying on the company for data about your own customers?

And if you’re paying for that data (and reports are that it’s not clear whether any grocer is paying Instacart for the data the latter collects), that raises the even more provocative question of why you’re suddenly in the position of having to pay for data that you’ve always collected directly from customers without paying for it.

There are other troubling questions, too. What happens to the data if Instacart gets bought by another, larger company who’s a competitor of yours and who has no interest in sharing it with you anymore? And what if Instacart goes broke? The recent Radio Shack case has proven to be a real eye-opener about the complications that can ensue when a company wants to tell its data assets at bankruptcy. Concerned parties in that situation range from consumer advocates who fear that the data could end up in hackers’ hands to Radio Shack partners like AT&T, who worry that their customer data will end up being available to competitors like Sprint.

Sellers beware. Even better, be informed.

I don’t claim to have all the answers to the questions I’ve raised in this column today; I don’t think anyone does, at least not yet. Companies like Instacart and Favor, and services like Amazon Prime Now, are still relatively new to consumers, and it’s probably not possible at this point to predict exactly what their ultimate impact will be on traditional sellers of goods and services that have long relied on having direct relationships with customers. But the possibility that it could impair a traditional company’s ability to collect and use customer data is clear.

What I do know is that being alert and being informed are critical to being a smart decision-maker. It may be that relationships with this new class of companies that connect directly with customers are inevitable in the new sharing economy. If so, the issue becomes how you structure those relationships to benefit you the most and cost you the least. The key is to be aware of the opportunities and risks available to you in this new, emerging economy and to act accordingly.

As the great-grandson of the Mexican general who shot off Pancho Villa’s leg, H.O. embodies the spirit of a true revolutionary. His infectious passion and uncanny ability to predict the future has led him to found many successful start-ups including: Flightlock (acquired by Control Risks), Finetooth (now called Mumboe), and one of the first online non-profit media organizations, the Texas Tribune. He leads the Umbel team with one eye focused on battle tactics, one eye focused on long-term vision, and one eye focused on his iPhone. H.O. studied electrical and biomechanical engineering at the University of Texas at Austin.